US Security Labor Trends | 2021 Report
Security Labor Trends Report by Jeff Davis, WorkWave Group Vice President, Solution Sales
Co-Authored with Carissa Gappa, TEAM Software Senior Product Manager
2021 was certainly the most challenging labor market in modern times. April saw a record low applicant volume followed by the popularity of social theories like the “Great Resignation.” Many workers used continued social payments and a competitive hiring market to take long breaks from employment, completely change career paths, or simply switch jobs for increased pay. The applicant market increased substantially by the second half of the year with record hiring along with record job openings. By late in the year, wages had increased along with national inflation, further disturbing the labor market.
Security contractors have been no exception to the national labor trends. 2021 was a roller coaster of applicants, hires and employee counts. April saw near record low applicants and decreasing employee counts. By late summer, applicant volume was increasing, hiring hit record highs, followed by payroll counts. Security contractors have managed to increase hires while security labor trends participation rates remain low.
Industry quit rates remain high, about double the national average, and have trended upward at the same pace as national quit rates. While a record 3% national quit rate grabbed headlines in Q4, the contract security industry peaked at 6% and dropped to 4.8% in December. Likewise, security layoff rates are slightly higher than the national average and have remained so over the past year. We’ve seen a slight incline for layoffs for security contractors while national numbers have trended down.
Employee retention remained a challenge in 2021 — the contract security industry continues to average double the national hire rate. Security contractors continued to focus on hiring younger generations, though this report examines how younger generations experience higher turnover than older peers. In a big contrast to 2020, Gen Z hiring rates were nearly equal to Millennials, combined to make nearly 75% of new hires.
U.S. Unemployment, Participation Rates and
The U.S. unemployment rates have continued to drop since the record 14.8% in April 2020. While 2021 began with the year at historic levels above 5%, it trended down to under 4% by the end of the year.
As unemployment rates have steadily decreased in 2021, security employment numbers (represented as the % change in active employees, month over month) grew consistently through the first half of 2021 while unemployment rates dropped consistently. Security companies were able to keep pace with hiring while the general labor pool decreased.
The second half of 2021 showed a hiring boom with abnormally high increases in active employees in August. Seasonally speaking, we normally see higher quits and hires in August due to the start of school, but a 5% increase is the highest seen since TEAM began tracking employee levels. The rest of the year we have continued to see increases in employee counts. Our clients are growing at a steady pace.
U.S. labor participation rates have rebounded since the 2020 lows. However, rates are still around 62%, 1.5% less than pre-pandemic levels. A small percentage of the U.S. workforce left during the pandemic and has not returned.
Security contractors’ slow employee growth in the first half of 2021 may have been due to a lack of available workforce. With employee numbers growing and trending upward, we anticipate security companies should be able to serve more clients.
U.S. Quit Rates vs. Industry Quit Rates
Security contractors traditionally face a higher quit rate than the broader labor market. Through Q2 2021, quit rates for the U.S. market slightly increased. Quit rates for security increased more steadily from a 4.5% low in March to a 6% high in November 2021. Quit rates remained high throughout the year but showed a drop to 4.8% in December.
Looking at the 24-month trend, the security quit rate has increased over time at the same rate as the national trend. Security contractors traditionally see quit rates nearly double the national average and that trend continued through 2021 while the national quit rate hit 3%.
U.S. Layoff Rates vs. Industry Layoff Rates
U.S. aggregate layoff rates have been on a slight decline, starting at 1.2% and ending at 0.8% through December. The security industry layoff trend was relatively low the first half of the year, about 50% higher than the national average. Security rates peaked at 2.4% in September, a traditionally high period of year for employee churn, which correlates with higher active employee rates in October (see Exhibit 2). The distribution has normalized and we’re now seeing the same gap in layoffs we’ve seen in previous years.
U.S. Hire Rates vs. Industry Hire Rates
The U.S. hire rates remained consistent through the first half of the year, slightly increasing throughout the remainder of 2021 and settling at 4.3% in December. This is a higher rate than 2019 and years prior.
Security firms have a consistently higher quit rate leading to the need to hire more. As discussed above, employee counts were up to 3.3% in October. Security hired 7.9% of their employee base in the first half of 2021 and continued to grow by hiring an average of 9.4% in the second half of the year. And, hirings at a record rate in September lead to an increase in payroll.
When comparing industry hire rates vs. separation rates, we see a gap that’s consistently positive throughout 2021. In a nutshell, contract security companies can hire more employees than they’re losing, leading to a net gain in available workforce. Not all industries can make that claim.
Age Group Analysis
Employees aged 20 to 59 make up nearly 80% of both the national and contract security workforce, but security tends to hire a much younger employee base than the national average. Employees aged 20-29 (both Gen Y and younger Millennials) make up nearly one third (31%) of the total security workforce versus only 20% of the national employee base.
Likewise, employees aged 40-59 make up 40% of the total workforce but only 28% of security employees. These age groups make up most of Gen X. When it comes to Boomers (approximately 60+ years of age), security employee counts are slightly greater than the national average.
Generational Hire Rate vs. Annual Retention
Looking at retention rates over the past five years, it’s probably no surprise that older workers stay longer than younger ones. Retention for Boomers and the Silent Generation is around 46% for at least 12 months. These two generations only account for 8% of hires. Over the past 12 months, Boomer and Silent Generation retention rates have dropped, signaling their loss in the workforce. Millennial hires remained high over the past two years at around 40%. Gen Z hiring is also very high at this point, while GenX, Boomer and Silent generation hire rates are historically low.
Applicant trends for the security industry followed the national trend through the first part of 2021 with lower job search activity in Q1 leading to fewer applicants. Spring saw record low applicants, like the beginning of the pandemic, but volume increased dramatically over the following months to nearly pre-pandemic levels by summer. The second half of the year saw consistent applicant volume numbers as employers switched advertising strategies and invested heavily in job advertising.
The contract security industry faced major labor challenges in the first half of 2021 with an increased demand for services coupled with a waning candidate pool. The second half of the year saw a rebound in applicant volume, hires and employee counts but a continued competitive hiring market leading to higher wages. U.S. unemployment rates have slightly decreased while participation rates have held steady and are starting to approach pre-pandemic levels. Security contractors managed to grow employee rosters over the year, with a slight dip in November and December. Layoffs in the U.S. had steadily and slightly decreased throughout the year, while security contractors let go of a higher percentage than the national average. Overall, industry staffing fared well as hire rates were able to stay ahead of termination rates on average for 2021.
In an incredibly challenging hiring market, employee retention continues to be critical. We believe there are several areas to investigate that could lead to improvements in hiring and retention. Industry quit rates were rising along with the national rate and were still nearly double the national averages. With a labor shortage in all markets and industries, employees now have opportunities to try different careers or move up in pay scale. Since it can take longer to onboard guards due to background checks, training, etc., it’s even harder to win over applicants who know there are faster ways to get a paycheck. Security contractors need to find solutions to make their jobs more attractive than other industries, like quick service restaurants or warehouse work.
Officers have multiple reasons they leave jobs, with the obvious factors of pay and direct supervision. Two other factors often cited are cashflow and transportation. On-demand pay solutions are helping employers bridge cash flow emergencies and becoming commonplace in most hourly workforces. Smarter hiring practices like local targeted job ads are proving helpful in finding candidates who live close to their place of employment. Key retention tools include professional development opportunities as well as increased schedule flexibility to fit employee needs.
Understanding generational employee retention is also a key to stopping the revolving door. Millennials make up nearly one-third of employee bases, yet only 22% are retained annually. Gen Z makes up nearly a third of new
hires, nearly the same as Gen X, yet their retention numbers are also poor. In general, older employees tend to stay longer. If your goal is to reduce turnover, we recommend advertising in channels where Gen X and Boomers frequent (Facebook, for example)
For the purposes of this report, we’re not distinguishing between front-line workers, full or part-time, from the broader employee base.